Scottish regional carrier Loganair has posted a pre-tax loss of £8.93 million for the year to March, blaming the downturn on the ending of its franchise agreement with Flybe.
Loganair says it spent nearly £3 million rebuilding its own brand and back-office functions after Flybe pulled out of its agreements last year.
The move also put the airlines in direct competition with each other on several key routes, mainly in the Scottish Highlands and Islands, after Flybe started a new franchise agreement with Eastern Airways.
However, Flybe dropped many of the Scotland flights in the first half of 2018 as part of its route consolidation scheme and Loganair agreed to accommodate its rival’s forward bookings.
Loganair then faced delays in new code-share agreements with other airlines, costing it another £2.09 million.
Meanwhile, a price war with Flybe has cost Loganair an estimated £6.8 million, according to the BBC.
Despite the fall in profits, annual turnover was up 7 per cent to £110.7 million and passenger numbers increased 6.2 per cent to 812,541 – the highest ever for the airline.
Loganair warned in January that it would likely see a loss in the 2017-18 financial year owing to competition from Flybe.
David Harrison, chairman of Loganair, said: “This year’s results bring an end to 17 consecutive years in profit for Loganair, and the fact that we forecast last year that we would be loss-making in 2017-18 makes it no less painful.
“The extent of the loss is a direct result of competition on six of our eight largest routes, and from the outset we maintained that the markets on these routes were simply not big enough to sustain the level of seat capacity being introduced. This indeed proved to be the case.”
Jonathan Hinkles, MD of Loganair, commented: “We have carried out a full rebrand, repainted our aircraft in tartan livery, introduced new crew and ground staff uniforms, brought in a comprehensive system of service improvements for our customers and launched a significant sales and marketing programme – a tremendous effort by the whole Loganair team.
“Prices on the competed routes fell to unsustainable levels, so we faced the double impact of carrying fewer customers at significantly reduced average fares. But within two months of it beginning, 70 per cent of customers on the competed Highlands and Islands routes were flying Loganair and I’m proud that we experienced that brand loyalty.”
loganair.co.uk